MARKET POINTS: by Woody Dorsey
The 99% daily Bullish Sentiment on 3/2 was a cogent emotional and Price High. As advised last week on my nominal low date, “one may want to simply get Neutral. Corrective ranges often resolve with upside episodes.” Last week was a great cover. Nominal timing remains Bullish. There is no big picture. Do not “Believe” in the market.
- Near Term Diagnosis: Sentiment came in at 93% Bullish today which looks like a confirmation of the upside surprise.
- Interim Term Diagnosis: The Trump “Melt Up” is corrected and did resolve into an expected “Buy the Dip.” This strength will set up the secondary Interim High which I have profiled.
- Long Term Diagnosis: The TrumpTopping Process will eventually result in a “very meaningful decline.” That is not due yet.
- QUESTIONS ANYONE? Client question. I am sending last week’s information as it sheds some light on the question of where the market is now in terms of new highs. “Hi Woody, With reference to your latest report, you state that there is weakness into 4/19ish to be followed by a recovery into mid may. Is this recovery likely to result in new highs? I subscribe to various Elliott wave newsletters which forecast that we are currently in a wave (4) of a 5th wave with new highs predicted in the next few weeks/months before the start of a significant decline. Is this in line with your own forecasts?”
- Thank you. No one knows if new highs are coming. They may in some indices. Elliott wave is a language which can be useful but as we see in life, words, concepts and language can often be misunderstood. So too with the Elliott wave. There are not market systems that have answers all the time. I had been looking for an initial Trump Top followed by a buy the dip followed by a secondary high to sell into. I look at it that way. Now that secondary high does not have to exceed the 2400 S&P level. In Elliott terms, it could be a “fifth wave failure.” QQQ might make new highs but not the Transports. An event may occur which triggers some wholly new negative reality for the markets. Anything can happen. At any rate, yes it does look like there could be a move back to the highs. We will know more in 2-3 weeks by how the trade unfolds. Generally, playing the market for a fifth wave move, either up or down, is not the best or easiest trade.
- “My studies do suggest that a great correction will be coming. It is not here yet. If one really wants to learn more about the market…just listen to it and follow it. No one can teach you to become self-taught!”
Please email any questions as they are likely to be of interest to all readers and may inspire me to provide more and better answers to the mysteries of the market than I might offer just on my own. [email protected]
MARKET TIMING: The 99% Bullish extreme on 3/1 remains as an extreme and may now appear to be best interpreted as a 3 wave top or, a momentum high. The profile was for a “Down March, a pop in early April followed by a further correction into 4/19ish followed another upside episode into May.” That scenario continues to play out. Stocks had a Rangy look trading which supported the idea that it would be seen as a, “Buy the Dip.” situation. As I said last week: “I have and do expect a Price Recovery into May and maybe beyond. This week was profiled as a potential low. Use weakness for short covering. Stocks are telling that the nominal strength into May will occur. Obviously overt upside has occurred. Now, there are some known dates coming up: 5/3 French Debate, 5/7, French Vote. France turned out to be Bullish so, if we rally into that, it may be a sell! There is an indicant for a trading High 5/10-15. That could be followed by a good decline for 3-5 days followed by further upside tries even into June. The good news is that this TRUMP 2.0 will be the endgame I have been looking for.
SENTIMENT INTERPRETATION: The Dorsey Tactical Market Sentiment registered a rare 99% Bullish on 3/2. Sentiment turned lower. The 8% Bullish did fall close to the Low and near layered support, from 2328 to 2335. I noted the 90% on 4/21 as likely confirming the low and resolving into the May upside. Daily sentiment has become very robust along with Price which supports the idea of a leg up.
The DORSEY Intermediate Market Sentiment declined to levels commensurate with prior trading lows. And, was deemed to be, “an ideal accompaniment to the profiled recovery into May. Thus, all measures of sentiment are supportive of a Recovery rather than much more downside at this time.” Sentiment in now strongly trending back up towards optimism.
MARKET SUMMARY: A Trading Top occurred on 3/1. The modest albeit persistent correction from there lasted 6-7 weeks. The timing profile allowed for a low last week. That has clearly been ratified. Repeat: “Allow for this Recovery into May.”
TECHNICAL VIEW by Gary Dean: The bulls need to push the spx above 2390 resistance zone for a reaction trade up to 2393-2400. The bears need to push the spx below 2377 for a reaction trade down to 2360-2351
- Short Term Support- Below 2377 is earliest clue 2360/2351 may come into play
- Resistance Levels: 2390-2393-2400
The ABC pattern I have been following has been put to trash-with a series of gap ups by the bulls. We now have to follow the range/s which as of now-is 2390 high and 2328 low. If the bulls push through the 2390 and can get through the 2383-then the next stop is the 2400 level. Things are quite overbought here, but lacking bearish divergences. I am not sure if that does or doesn’t matter with the large gaps below. Right now, we have to see where the range high come into play. If new highs are in the cards-then this would be a final wave 5 up-which would open the door for a larger drop when it completes. Still need more information-but so far, traders are paying attention to the 2390 pivot range.
I added a color coded spread sheet to show the technicals on different time frames. The easiest way to view this-is to look at momentum-signal and then support/resistance. Obviously it would be great to buy when all are on a green code and look to short when all are on a red code. The important take away from the chart below-are the bearish divergences on the daily-15’s and 5 minute charts. It is suggesting some backing and filling in the coming hours/days.